Page - 40
The Once and Future C&F - The Go-Go Years
The Actuarial Profession in 1974 Let’s digress for a moment to review the state of the actuarial profession in 1974. There were about 600 members of the Casualty Actuarial Society (CAS) in 1974. Most of them were working on the pricing side of the house. The Proceedings of the CAS in 1972 included R.J. Balcarek’s “Loss Reserving in the Sixties,” which includes this scary line: “It is obvious that during the sixties less adequate loss reserves acquired a fair amount of popularity, if not respectability. This should not be surprising as, in the short run, most of the practical forces affecting the operations of an insurance company make an under-reserved position preferable to an over-reserved position.” His further explanation of what he means by practical forces is even scarier — although he does concede that, in the long run, a company with this attitude toward under-reserving might become insolvent. I don’t think IBNR (claims that are “incurred but not reported”) really existed as a well-developed (actuarial pun intended) concept until some of the seminal reserving papers started showing up in in the early to mid 1970s. These papers include David Skurnick’s “A Survey of Loss Reserving Methods” in 1973, Ruth Salzmann’s “Estimated Liabilities for Losses and Loss Adjustment Expenses” in 1974, and Chuck McClenahan’s “A Mathematical Model for Loss Reserve Analysis” in 1975. McClenahan writes: “It has long been recognized that loss reserving is, or should be, within the domain of the Casualty Actuary; but in no other area have we applied our expertise with as little success … In our sixty year history we have truly put the ‘science’ in ‘actuarial science.’ But, as a review of the experience of the past few years points out, we still have difficulty establishing accurate loss reserves.” That’s not good.
On the one hand, he had been training for the CEO role for years. He seemed to enjoy the business of insurance and managed C&F through the tumultuous 1970s. He would prove to be the ultimate salesman — and hero to C&F shareholders — when he convinced Xerox that C&F was a premier insurance company that should command an eye-popping valuation. But it’s not that simple. A salesman is gonna sell. Even as Russell railed against irresponsible price competition, inflation and litigation, he kept his
Cover of the C&F Annual Report, 1974.
Made with FlippingBook Digital Proposal Creator